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Campbell County okays Energy Project Assessment District, paving way for PACE energy financing

Special to NKyTribune

The Campbell County Fiscal Court approved legislation Wednesday night creating a county-wide Energy Project Assessment District  (EPAD) that will allow property owners to obtain special financing for energy-efficiency upgrades to commercial, industrial, nonprofit, agricultural, and multi-family properties throughout the county.

In 2015, the Kentucky General Assembly passed legislation that allowed cities and counties to create EPADs, special assessment districts where commercial property owners can obtain Property Assessed Clean Energy (PACE) financing to pay for energy-efficiency improvements made to these properties.

“PACE financing covers 100 percent of the hard and soft costs of energy upgrades, such as solar panels, LED lighting, energy-efficient air conditioning and heating systems, and water conservation projects,” said Chris  Jones, director of PACE financing for Energize Kentucky, a nonprofit organization that administers the program in Kentucky.

“This is done through fixed-rate, long-term loans that require no down payment or personal or business guarantees. The loan is repaid annually through a voluntary special assessment on the property owner’s tax bill.”

About a dozen local governments in Kentucky – including the cities of Covington, Newport, Bellevue, Bowling Green, Owensboro, and Frankfort — previously passed legislation creating EPADs, but Campbell County is the first county in Northern Kentucky to approve a countywide EPAD ordinance.

The Lexington-Fayette County Urban Government is considering similar legislation.

“We are excited to pass enabling legislation to allow the use of PACE financing throughout Campbell County because we recognize that this financing tool is a win-win situation — for property owners and developers as well as the county and our cities in our collective efforts to promote economic development in our communities,” said Campbell County Judge-Executive Steve Pendery.

With passage of the Campbell County ordinance, developers who are rehabbing two commercial buildings in the Ft. Thomas’ Midway business district plan to use PACE financing for energy upgrades to these buildings, Jones said.

Once Energize Kentucky determines that these properties qualify for PACE financing, it will ask the Fiscal Court will pass separate legislation approving the use of this financing for these buildings and will do the same thing for other projects that plan to use this type of financing in the future.

“PACE is a flexible financing tool that gives developers a new source of revenue  for both new construction projects and building renovations,” Jones said. “Having access to PACE financing is changing how developers think about energy efficiency. To be able to instantly increase your capital stack for these improvements removes the financial burden that this new technology sometimes brings to development projects and makes the goal of an energy-efficient project more attainable.”

Local governments also like the PACE program because it promotes economic development in their communities, including the rehabilitation of older buildings with outdated energy systems, which helps to retain existing businesses, Jones said.
The City of Covington was first municipality in the state to create an EPAD after the law went into effect in 2015. The city approved a PACE-financed project at the Ivy Knoll Senior Retirement Community on Highland Avenue, where the property owner installed $750,000 in energy upgrades to replace outdated and inefficient equipment in the seven-story building.

Ivy Knoll in Covington

These improvements included new solar panels that generate more than 64,000 kilowatt hours of energy annually, LED lighting that saves more than $12,000 annually, and energy-efficient heating and cooling units and new elevator technology, which reduced energy consumption of the old systems by 20 and 40 percent, respectively. Overall, the energy savings at Ivy Knoll has been about 37 percent annually since the improvements were installed.

In August 2017, Covington became another Kentucky PACE first when it became the first city in the state to use PACE financing for a new construction project. Indianapolis-based Flaherty & Collins Properties is in the process of incorporating more than $4 million in energy improvements to its “RiverHaus” project, which is currently under construction at the southwest corner of Fifth and Main Streets in Covington’s Mainstrasse neighborhood.

This high-end, residential development includes 187 one- and two-bedroom units, a 314-space parking garage, and retail commercial space on the ground floor. The energy improvements include energy-efficient windows, LED lighting, heating and cooling systems, programmable thermostats, and insulation, Jones said.

Jones said the advantage of adopting a countywide EPAD, as Campbell County did on Wednesday night, means that individual cities within the county no longer need to adopt their own EPAD districts to receive this benefit since they now fall within the countywide district.

“This really speeds up the process for property owners who are interested in pursuing this financing tool,” Jones said. “A process that sometimes took many months to complete can now be completed in just a few weeks.”

Jones said that Energize Kentucky plans to speak with elected officials in Northern Kentucky’s other counties in the near future to see if they also have an interest in passing countywide legislation similar to the ordinance the Campbell County Fiscal Court passed Wednesday.

Energize Kentucky is a nonprofit organization and program administrator that works with property owners to secure PACE financing for qualified energy-efficiency projects. It coordinates these efforts with local governments and connects property owners with private PACE capital providers and energy-efficiency contractors to ensure the successful funding and installation of these improvements. For more information about Energize Kentucky, contact Chris Jones at cjones@kypace.org or 859-756-5310, ext. 1.

How PACE Financing Works

 A property owner decides to use PACE financing to purchase and install energy-efficiency equipment in commercial, industrial, non-profit, agricultural, or multi-family properties. These energy upgrades can be incorporated into new construction or the rehabilitation of existing buildings.

 If the local government where the property is located does not have an Energy Project Assessment District (EPAD), the local legislative body (city or county) must adopt an ordinance creating a special assessment district in all or part of its jurisdiction.

 A PACE program administrator like Energize Kentucky can help a property owner find qualified energy-efficiency contractors for the project. Property owner and contractor then agree on a project scope.

 Property owner submits an initial eligibility form, then an application with an energy project summary to PACE program administrator.

 If qualified, program administrator facilitates financing for the project with PACE lenders. This financing does not require a down payment or personal guarantee and covers 100 percent of all of hard and soft costs of energy upgrades through long-term, fixed-rate financing, generally with payment terms between 15 and 25 years.

 Local government approves
PACE financing legislation for this particular project.

 Local government adds EPAD assessment to the property tax record.

 PACE lender distributes funds to contractor, who makes the energy upgrades to the project on the property.

 Local government places special tax assessment on the property tax bill each year, which is paid by property owner until the loan is finally paid off.

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